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Regarding the financial review and outlook for Walmart (WMT) for the 3Q of fiscal year 2023 (January to March).
For the 3Q of fiscal year 2023 (August to October), the company's sales revenue increased by 8.7% compared to the same period last year, reaching 152.81 billion dollars. Excluding the settlement-related expenses for lawsuits of 3.325 billion dollars, the non-GAAP adjusted EPS was 1.50 dollars (compared to 4.57 dollars in the same period last year). Both the sales revenue and adjusted EPS exceeded market expectations. The sales revenue of Walmart's US stores also exceeded market expectations with an 8.2% increase. The growth was driven by strong food sales and a 16% increase in e-commerce. The average shopping frequency at existing stores increased by 2.1% and the average unit price increased by 6.0%, contributing to the revenue growth. In addition, the sales revenue of the membership-based Sam's Club stores increased by 10.0% and Sam's Club membership fee income increased by 8.9%. On the profit side, despite the strong performance of low-margin food products, the operating profit margin decreased to 1.8% due to price promotions (compared to 4.1% in the same period last year). On the other hand, inventory clearance progressed through expanded price reductions, resulting in a 4% increase in adjusted operating profit (6 billion dollars).
Based on the strong performance in the 3Q, the company has raised its full-year performance forecast for fiscal year 2023. Considering the headwind of 4.1 billion dollars in foreign exchange, the sales revenue for fiscal year 2023 is expected to increase by 5.5% compared to the previous year, up from the previous forecast of 4.5%. The full-year adjusted EPS forecast has been revised upward from a 9-11% decrease compared to the previous year to a 6-7% decrease. The sales revenue of Walmart's US stores has been raised from a 4.0% increase to a 5.5% increase. The company has also announced a share buyback plan amounting to 20 billion dollars.
Amidst this, the year-end sales battle in the USA for 2022, which started in October earlier than usual, appears to have been sluggish. The retail sales in December 2022 (seasonally adjusted) announced by the US Department of Commerce on January 18 decreased by 1.1% compared to the previous month, exceeding the market estimate of a 1% decline. Additionally, the data for November 2022 was downwardly revised from a 0.6% decrease to a 1% decrease compared to the previous month. Furthermore, according to the National Retail Federation's announcement on January 19, the sales during the year-end sales battle in the USA from November to December 2022 increased by 5.3% year-on-year to $936.3 billion, falling short of the pre-estimate (increase of 6-8% to $942.6 billion to $960.4 billion). The growth rate significantly shrank from the record-high 14% increase in 2021. Sales of electronic goods and furniture, among others, excluding essential items, were sluggish due to inflation. E-commerce sales accounted for just under 30% at $261.6 billion, with a 9.5% increase. The pre-estimate (increase of 10-12% to $262.8 billion to $267.6 billion) was undershot.
Trends in US retail sales in December 2022 as announced by the US Department of Commerce
Based on the strong performance in the 3Q, the company has raised its full-year performance forecast for fiscal year 2023. Considering the headwind of 4.1 billion dollars in foreign exchange, the sales revenue for fiscal year 2023 is expected to increase by 5.5% compared to the previous year, up from the previous forecast of 4.5%. The full-year adjusted EPS forecast has been revised upward from a 9-11% decrease compared to the previous year to a 6-7% decrease. The sales revenue of Walmart's US stores has been raised from a 4.0% increase to a 5.5% increase. The company has also announced a share buyback plan amounting to 20 billion dollars.
Amidst this, the year-end sales battle in the USA for 2022, which started in October earlier than usual, appears to have been sluggish. The retail sales in December 2022 (seasonally adjusted) announced by the US Department of Commerce on January 18 decreased by 1.1% compared to the previous month, exceeding the market estimate of a 1% decline. Additionally, the data for November 2022 was downwardly revised from a 0.6% decrease to a 1% decrease compared to the previous month. Furthermore, according to the National Retail Federation's announcement on January 19, the sales during the year-end sales battle in the USA from November to December 2022 increased by 5.3% year-on-year to $936.3 billion, falling short of the pre-estimate (increase of 6-8% to $942.6 billion to $960.4 billion). The growth rate significantly shrank from the record-high 14% increase in 2021. Sales of electronic goods and furniture, among others, excluding essential items, were sluggish due to inflation. E-commerce sales accounted for just under 30% at $261.6 billion, with a 9.5% increase. The pre-estimate (increase of 10-12% to $262.8 billion to $267.6 billion) was undershot.
Trends in US retail sales in December 2022 as announced by the US Department of Commerce
Looking at the breakdown of products by the National Retail Federation, food and beverage stores showed a strong increase of 7.8%, while electronic devices, home appliances, and furniture, which usually sell well during sales events, decreased by 5.7%, 1.1% and 5.7% respectively. It appears that many consumers bought food and daily necessities in bulk during sales to reduce household burdens.
Walmart's product lineup distinguishes high-priced items and focuses on medium to low-priced food, daily necessities, clothing, and household products. According to statistics from the US Department of Commerce and the National Retail Federation, US consumers have been avoiding high-priced goods and refraining from purchasing electronic appliances and furniture, which are less related to daily life. As a result, there seems to have been a mixed result in consumer spending, with sluggish sales of electronic appliances and furniture, and strong performance of food and daily necessities. Walmart has forecasted a 3-5% decrease in adjusted EPS for the 4th quarter (11-1) of 2023 fiscal year, including the 2022 year-end sales battle, compared to the same period last year. However, the actual 4QEPS may greatly surpass the company's expectations, indicating the possibility of a strong performance.
Walmart's product lineup distinguishes high-priced items and focuses on medium to low-priced food, daily necessities, clothing, and household products. According to statistics from the US Department of Commerce and the National Retail Federation, US consumers have been avoiding high-priced goods and refraining from purchasing electronic appliances and furniture, which are less related to daily life. As a result, there seems to have been a mixed result in consumer spending, with sluggish sales of electronic appliances and furniture, and strong performance of food and daily necessities. Walmart has forecasted a 3-5% decrease in adjusted EPS for the 4th quarter (11-1) of 2023 fiscal year, including the 2022 year-end sales battle, compared to the same period last year. However, the actual 4QEPS may greatly surpass the company's expectations, indicating the possibility of a strong performance.
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